Week ahead: Brexit talks, Walmart results, US retail sales

While markets keep an eye out for fresh developments on trade and Turkey, next week brings results from US retailers — including the largest, Walmart — a dusting of economic data and another round of Brexit talks.

Here’s what to watch in the coming days:

Walmart and US earnings. US earnings season starts to wind down with just 14 companies listed on S&P 500 reporting next week. The focus shifts to retailers with companies like Macy’s, Nordstrom and Home Depot, along with non-S&P 500 members like JCPenney and Williams-Sonoma, set to unveil quarterly updates.

Walmart, the world’s largest retail chain, is due to report results on Thursday. Analysts are expecting adjusted earnings of $1.22 a share on sales of $126.1bn, according to a Thomson Reuters survey.

The company has switched strategy to better combat Amazon by exiting markets like Germany and South Korea and pivoting to markets like China, Latin America and India, where it parked $16bn in Flipkart earlier this year. Investors are likely to expect updates on the investment on the earnings call along with possible news of further investments.

UK and US data. The economic calendar is fairly light next week. In the UK, focus turns to employment and inflation data after the Bank of England earlier this month lifted rates to the highest level in almost a decade and signalled that further rate rises are on the way.

Employment data on Wednesday are expected to show the number of people in work rose by 95,000 in the three months to the end of June — slower than 137,000 in the previous quarter — while the unemployment rate held steady at 4.2 per cent.

Meanwhile, consumer prices due the following day are estimated to be flat month-on-month in July and up 2.5 per cent from a year ago. Economists expect the drag from clothing and footwear should have faded, while transport and food could help boost figures. Core consumer prices that strip out volatile items like food and energy are projected to have risen 1.9 per cent year-on-year.

Across the pond, investors will eye US retail sales data due Wednesday, which are expected to show retail sales climbed 0.1 per cent in July from the previous month. So-called control retail sales, which exclude petrol, building materials and other volatile items, are expected to have advanced 0.4 per cent.

Brexit talks. Two days of Brexit talks between the UK and EU are scheduled to resume in Brussels on Thursday. UK trade secretary Liam Fox has recently increased pressure on EU leaders to agree to Prime Minister Theresa May’s Chequers Brexit plan. In an interview with the FT, he said the European Commission’s “intransigence” made it “60-40 per cent” likely that the UK would have to leave without an agreement next March.

Hot Topic: US core inflation rises at fastest pace in 10 years
Strong data keep Fed on track to raise interest rates two more times this year

Core consumer prices in the US rose by their quickest pace in a decade in July and topped market forecasts, keeping the Federal Reserve on track to raise interest rates twice more this year.

The data add to a robust picture of the US economy, which grew by a speedy annual rate of 4.1 per cent in the June quarter. The unemployment rate is close to its lowest level in 18 years.

Core inflation, which strips out volatile energy and food prices and is closely followed by the Fed, rose 2.4 per cent year on year in July and up from 2.3 per cent in June. That was the fastest annual pace of core inflation since September 2008, and topped market forecasts for 2.3 per cent.

Growth in headline consumer prices held steady with June at 2.9 per cent year on year in July from a year ago, buoyed by higher fuel prices and in line with the median forecast among analysts surveyed by Thomson Reuters.

While headline inflation is rising more quickly than average hourly earnings, Michael Feroli, US economist at JPMorgan Chase, said he expected wages to pick up given the strength of the labour market. The picture, he said, is “pretty close to Goldilocks”, leaving the Fed well positioned to carry on tightening policy at its current pace, with no reason to either speed up or slow down.